Sun Burn 1: Area courted solar energy with research

Like most relationships, it started slowly. The two began to get acquainted. There was the usual small talk and some occasional flirting.

In what seemed like record time, they decided they were made for one another. They shared so much in common — mutual interests, a willingness to make the necessary time commitment and hopes and dreams of a longtime future together.

Familiarity led to mutual respect and an intoxicating affection for success. Before they knew it, and without much planning, they were involved in a serious relationship. They couldn’t see anything beyond the here and now. They had nothing but good things to say to and about each another.

It was the best of times.

But then they hit the inevitable rough patch. They were unprepared for the jealousy that infiltrated the relationship as they began to listen to what others were saying about them. With that doubt came the beginning of bigger problems. They began to see, even focus on, each other’s flaws — a few slight exaggerations, unintentional broken promises and the aggravation of not quite living up to expectations.

Money became an issue. They had spent what they had without enough planning, and it became almost impossible to make minimum payments. The bill collectors started calling. And calling. And calling.

Rather than tackle the issues head on, they took the easy route. They never really talked about what was happening. Each would admit feeling a little let down, but there were no real hard feelings. They just accepted the inevitable. They just stopped seeing and calling one another. They split up.

It was the worst of times.

They both knew they would eventually have to deal with everything that had happened. They just weren’t quite ready.

This is the story of Greater Toledo and its courtship of, and investment in, the solar industry.

The Toledo region was committed to upholding its reputation of being a great place to live — well-paying manufacturing jobs, a safe, family-oriented community and comfortable city amenities.

And then the recession hit.

Economic uncertainty

Beginning in 2000, and peaking with the 2007 recession, an estimated 50,000 jobs, or 14 percent of all employment opportunities, were lost in the Greater Toledo area, according to the Ohio Department of Job and Family Services (ODJFS).

The automotive industry was hit hardest. General Motors Co.’s Toledo Powertrain plant saw extensive job losses from 2000 to 2010 as 4,000 jobs became 1,600. Perrysburg’s Chrysler plant also lost about 2,500 jobs, from 5,000 workers in 2001 to half that many in 2010.

In the retail sector, ODJFS figures show that Toledo lost 9,500 jobs between 2000 and 2010. The state agency also estimates 3,100 Toledo jobs were lost in “general merchandise stores” in that same 10-year span.

No one industry was to blame; generally speaking, jobs were the victim of increased automation and greater productivity, which allowed employers to produce the same, or often more, product with fewer workers.

In stepped the solar energy industry.

Political support

Buoyed by groundbreaking research at the University of Toledo and funded by the American Recovery and Reinvestment Act of 2009, Toledo saw a chance to rebound from its economic woes and become what Dan Johnson, UT president emeritus and a solar industry advocate, called “the solar capital of the nation.”

With financial and civic support — what cynics might call a romantic wooing of the solar industry — Toledo saw the emergence of no fewer than nine solar energy business ventures.

First Solar

In 1984, inventor and entrepreneur Harold McMaster founded Glasstech Solar to manufacture low-cost, thin film cells on a large scale. At the urging of a colleague, McMaster founded Solar Cells, Inc. in 1990. In February 1999, he sold Solar Cells, Inc. to True North Partners LLC., who renamed it First Solar.

Three years later, in 2002, First Solar launched production of commercial products. On June 3, 2003, First Solar broke ground on its Perrysburg facility and began production one year later.

The company went public in 2006, trading on the NASDAQ market.

On Nov. 17, 2006, the first day of its public offering of shares, First Solar reports its stock opened at $20 a share. By the end of that same day, a single share of stock had climbed to $28.30, a one-day increase of 41 percent on the initial investment.

Eleven months later, on Nov. 1, 2007, First Solar stock reached its peak: the initial $20 investment per share had become $237.15 a share. A stockholder’s modest investment of $1,000, the cost of 50 shares of stock, had become $11,857.50.

On Nov. 17, 2007, its first anniversary of going public, First Solar reported a market value of $15 billion.

Those kind of short-term returns are unparalleled, and some stockholders who had gotten in on the ground floor suddenly found themselves rich beyond their wildest dreams. Excitement in the company rose to a fever pitch.

No American business venture has been able to maintain an almost 1,200 percent annual growth rate for any length of time. First Solar was no exception. Stock prices began to fall, but shareholders, spurred by dreams of even greater wealth, continued to invest. Excitement in First Solar continued to grow.

In 2009, First Solar became the first solar panel manufacturing company globally to lower its manufacturing cost to $1 per watt. It has since been reduced to 73 cents per watt, and company officials predict the price will continue to fall.

Lower production prices took center stage because the less money First Solar had to spend producing solar panels, the less the firm would have to charge customers. Its lower prices eventually resulted in increased sales, higher company profit margins and healthy shareholder profit.

Additionally, by crossing the $1-per-watt threshold, First Solar made its energy competitive with power produced by conventional means. Consumers no longer had to spend any more for solar power than they spent for electricity.

Harold McMaster

At the end of 2009, First Solar also surpassed an annual production rate of one gigawatt. In doing so, it became the largest photovoltaic (PV) module manufacturer in the world before dropping in subsequent years.

Fast Company editors praised First Solar for focusing on “one overriding goal: driving down the cost of solar-power modules until they could compete with traditional power. It has used every strategy at its disposal, from newly patented technologies to overseas mass production to vertical integration at all levels of a project — all while managing to sidestep economic landmines and navigate the shifting policy landscape.”

First Solar also became the first renewable energy company in the past decade to be listed on the Standard & Poor’s 500, widely regarded as the best single gauge of the U.S. stock market. The S&P index includes the 500 leading companies in leading industries of the U.S. economy, capturing 75 percent coverage of all U.S. stocks.

A second solar company, Solar Fields LLC, followed in First Solar’s footsteps, establishing itself as a n industry leader in cutting-edge solar energy research.

Solar Fields began its life in October 2002 when Integrated Thin Films, the solar-energy project of McMaster and colleagues Frank Larimer and Norman Nitschke at UT’s Clean and Alternative Energy Business Incubator, underwent a name change. In 2002, UT was arguably the nation’s leading center for research on solar-energy technology.

Solar Fields faced its biggest challenge when its founder, McMaster, died Aug. 25, 2003, 10 months after the firm’s establishment.

In McMaster’s obituary, Michael Cicak, former president and COO of McMaster’s Glasstech Solar and current CEO of Willard & Kelsey Solar Group, acknowledged his mentor’s brilliance.

“There is no equal to Harold McMaster,” Cicak said. “When he speaks, you listen — then you analyze and learn from what he’s said.”

Solar Field ownership transferred to the firm’s investors and it was led by McMaster’s widow with guidance from Larimer and Nitschke. Helen McMaster ran the firm until it was sold to Q-Cells AG, a Germany company, in 2007.

At the time of the sale, Toledo media reported that Solar Fields’ patents, property and employees transferred to Calyxo USA Inc., a subsidiary of Q-Cells AG. Solar Fields’ investors received $5 million and 7 percent of stock in Calyxo USA Inc.

Norm Johnston

During its five years in Perrysburg, Solar Fields had nine employees whose primary focus was research.

In November 2007, Robert Collins, director of UT’s Wright Center for Photovoltaics Innovation and Commercialization (established in 2006), told Toledo media outlets that Solar Fields’ chief accomplishment was the development of machinery for the mass production of what was at that time a highly innovative style of solar panels that held promise of making energy from sunlight as cheap as that produced from fossil fuels.

Norm Johnston, Solar Fields’ CEO and inventor of the panel-coating technology used at Solar Fields, praised the sale, calling it “an excellent opportunity to be associated with one of the world’s most successful solar companies.”

Q-Cells AG, the parent company of Solar Fields’ new home, was First Solar’s chief competitor for leadership in the global market. Q-Cells AG had grown almost as rapidly as First Solar, increasing production by 42 percent in the first half of 2007. Its annual revenues were expected to reach $1.2 billion by year’s end.

Q-Cells AG was the world’s second-largest manufacturer of solar panels, although its primary expertise was in traditional technology. To gain the competitive advantage over rival First Solar, Q-Cells AG invested in a number of promising new “thin-film” manufacturing methods, specifically those used by First Solar’s fellow tenant in the UT business incubator.

Xunlight

2002 was a very productive year.

At the same time First Solar was launching production of commercial products and Solar Fields was morphing from Integrated Thin Films into Calyxo USA Inc., a pair of UT professors started looking for ways to commercialize their research in solar panels using thin-film photovoltaics.

Along with Harold McMaster and his Solar Fields’ team, UT physics professor Xunming Deng and UT visiting assistant professor Liwei Xu, conducted research at UT’s Clean and Alternative Energy Business Incubator. In the fall of 2002, Deng and Xu followed McMaster’s lead and co-founded their own company, Midwest Optoelectronics, LLC. Four years later, in 2006, the firm was reorganized, becoming Xunlight Corporation.

The commercial solar industry was attracting national attention at that time, and after First Solar’s first public offering of stock, Xunlight found itself in the lucrative position of riding First Solar’s coattails.

In its first eight months as Xunlight, the solar energy start-up raised $7 million in venture capital investment. By Sept. 29, 2007, Xunlight had collected another $3 million more in government funding, including a $1.9 million grant from the prestigious National Institute of Standards and Technology (NIST).

Toledo’s emergence in the industry of clean technology was becoming national news. The May 26, 2007, issue of The Economist highlighted Toledo as one of four regions in the U.S. that could emerge “as the Silicon Valley of clean technology,” citing Xunlight Corp. as an example of excellence.

Xunlight’s success was also documented in 2007 in articles appearing in Newsweek and The Wall Street Journal. Deng and Xu’s Xunlight had emerged from UT’s Clean and Alternative Energy Business Incubator as a model of how intellectual capital of university researchers could be turned into successful businesses and regional economic development.

Two months after Xunlight received the NIST grant, the Lucas County Board of Commissioners and County Treasurer Wade Kapszukiewicz announced that Lucas County was making a $2 million investment in Xunlight. Lucas County Commissioner Ben Konop said the county took the gamble because “we have a chance to become the Silicon Valley of alternative energy, and Xunlight will be at the front of that charge.”

In a guest column in Toledo Free Press three days later, Karl Rundgren, managing editor and co-anchor of FOX Toledo News, sang Xunlight’s praises, saying “it’s hard not to get excited about Xunlight’s prospects,” he wrote, noting the promise of the firm “bringing in $200 million annually” and ”possibly employing 700 people.”

Xunming Deng

The money continued to flow.

On April 25, 2008, Xunlight announced that private investors would contribute $22.3 million to give Toledo its second alternative energy product manufacturer in the past year. Trident Capital became Xunlight’s third major investor, making a $22.3 million investment. In doing so, Trident Capital joined Emerald Technology Ventures and NGP Energy Technology Partners, which had invested $7 million of their own money.

On the same day Xunlight got the $22.3 million infusion of capital, co-founder Deng excited the Toledo business community with the announcement that he was partnering with Al Compaan, a retired UT physics professor and longtime Deng associate, to establish Xunlight 26 Solar.

Three months later, on July 18, Xunlight received a $4.9 million grant from the Ohio’s Third Frontier Commission because, with Xunlight Corp. and Xunlight 26, Deng, Xu and associates were promoting high-tech jobs and business ventures. According to a Third Frontier spokesman, the money was earmarked to aid Xunlight in manufacturing.

Not to be outdone, one month later, on Aug. 29, the Toledo-Lucas County Port Authority guaranteed $1 million of a $7 million loan to assist Xunlight in the purchase and installation of a solar-panel production line at its Nebraska Avenue facility. The Port Authority also discussed possibly buying stake in the solar-panel firm.

The Port Authority board had enough confidence in Xunlight’s potential to vote unanimously to lend Xunlight the money from its Northwest Ohio Bond Fund. In doing so, Paul Toth, the Port Authority’s interim president, said the Port Authority was willing to take on part of the financial risk and accept stock warrants that would allow the organization to buy up to $100,000 of Xunlight stock at a fixed per-share price. Should Xunlight default on the $7 million loan, the Port Authority, along with Lucas County and a number of private banks, would have first claim to solar-cell production equipment, software and other intellectual property required to operate the solar panel plant.

Willard & Kelsey Solar Group

Another group of investors, four of who had worked with Harold McMaster in the 1980s to establish the pioneering firms of Glasstech and Solar Cells, joined forces in 2008 to create Willard & Kelsey Solar Group LLC. They intended the company to build upon McMaster’s solar energy developments while moving current technology to a higher level.

Led by solar industry veterans James Appold, Michael Cicak, James Heider and Gary Faykosh, the Willard & Kelsey executive team raised $105 million in investment capital to get the company up and running. Planned expenditures included $7 million to buy the factory, $7.3 million for renovations and $89 million for machinery.

On July 30, 2008, Toledo media reported that Ohio officials approved tax credits for Willard & Kelsey, whose founders had filed documents with the state detailing plans to develop a Perrysburg plant with 400 employees making low-cost solar energy panels.

At that time, Willard & Kelsey indicated it intended to redevelop Delafoil Ohio Inc., an out-of-business electronics component manufacturing plant on Progress Drive, off state route 25 in Perrysburg.

The Ohio Tax Credit Authority agreed to provide Willard & Kelsey credit against state income taxes worth 60 percent of the Ohio payroll taxes withheld from its employees. The job creation tax credit was approved to last 10 years.

Mohammad Smidi, a U.S. Environmental Protection Agency (EPA) official in Bowling Green, said a company executive told him earlier that month that Willard & Kelsey planned to begin operations as early as August 2008.

An EPA permit issued April 24 indicated the firm planned to make solar panels using a low-cost thin-film technology similar to that used at First Solar. That same EPA permit gave the firm permission to run a 24-hour-a-day operation producing 240 panels an hour at the Perrysburg factory.

Company executives also told Perrysburg officials they intended to seek a 10-year, $177,000 job-creation grant as well as assistance with road and traffic improvements.

The tax credits, approved July 28, 2008, were scheduled to begin in January 2009 and stretch through December 2018. A company executive told Ohio that Willard & Kelsey intended to create 400 full-time jobs by August 2011, with employees earning an average wage of $21.25 an hour.

Hopes ran high among Toledo political and business leaders. If Willard & Kelsey successfully executed its plan — and every indication was that its executive team’s extensive experience and presumed expertise almost guaranteed success — Perrysburg was destined to become the global center of the quickly expanding solar energy industry.

Isofoton North America

The most recent addition to the Greater Toledo solar energy industry is Isofoton North America, a Spanish solar energy company that chose Napoleon as the location for its North American manufacturing facility, initially scheduled to open in December 2011. Toledo-area political and business leaders responded with enthusiasm because Isofoton’s initial estimates were that the plant could generate as many as 330 jobs.

Toledo Free Press reported a year ago this month that the Ohio Department of Development (DOD) announced that it would provide $15.8 million of assistance to match the European manufacturer’s pledge to invest $16.4 million in Northwest Ohio.

The $15,893,057 in state funds included $7.08 million from the Ohio Enterprise Bond Fund, $5 million from the Ohio Air Quality Development Authority, $3 million in a 166 Direct Loan, $488,057 in an Ohio Job Creation Tax Credit, $250,000 from an Economic Development Grant and $75,000 from the Ohio Workforce Investment Program, according to James Leftwich, director of the Ohio DOD.

The Napoleon factory was initially slated to begin operation with 121 clean-energy manufacturing jobs and build up to 330 direct jobs by 2012, according to Angel Luis Serrano, CEO of Isofoton’s headquarters in Spain.

The DOD also projected another 1,000 indirect jobs being created by the Isofoton project in 2012.

“We are pleased that Isofoton looks forward to working closely with regional economic development partners and with the University’s multiple research and worker training fronts,” Jacobs stated in a news release.

Paul Zito, vice president of international development at the Regional Growth Partnership, echoed Jacobs. He used Isofoton’s decision to locate in Napoleon to make his point. He reported that Isofoton’s executives praised Northwest Ohio’s skilled labor force, work ethic, research and development programs at UT, supplier base and spirit of collaboration as their reasons for choosing this region.

Next week in Part II: How the solar industry, with its unlimited growth potential, began to struggle; a look at the circumstances that led Toledo-area solar energy corporations to restructure their organizations, change leadership, redirect missions and enter new markets.

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11 Responses to “Sun Burn 1: Area courted solar energy with research”

ErieEagle

Free markets & entrepreneurialism: are so far removed from these green energy boondoggles as to be absolutely mystifying why anyone with any sense actually thought they would work!

This isn’t hindsight…it is proven time and time again, that Federal Government interference in Markets, always creates MASSIVE distortions in outcomes !!!
THINK:prohibition, the drug war, nuclear power plants, milk, sugar, everything the Fed is in is costly !

I applaud the Toledo Free Press for finally inheriting the mantle of real journalism. The Toldo Blade is definitely not up to this task, especially with their unholy ties to the University of Toledo (read: publish all press releases from Xunlight as God’s gospel truth). I look forward to reading more about the ridiculous promises of these “green” companies all the while the leadership were planning to offshore both jobs as well as their profits!

Investments by the Chinese have slowed tremendously in just the past few months due entirely to China’s,$3 TRILLION debt !

They are in worse shape now than America, is with a debt to GDP ratio of 89% !?
America’s, debt to GDP ratio, is 79% !

I recall the Japanese, in the late 80′s, had tons of dough to invest here.
Only, to see those investments dry up as quickly as the Japanese economy slowed down to recession level rates and they have not completely recovered yet ?!

Amen, JackPumpkin. Deng had his little time in the sun getting his arrogant professor ego stroked all the while wasting VC and taxpayer money. He had his fun while on leave from the University, and as these things typically go, he will quietly slink back to his lab coming up with non-commercially tenable ideas. And yet UT hired DOE people, giving them big salaries, for this fantasy of a “solar silicon valley” in Toledo. Why can’t the Free Press be more proactive on this stuff? We all know the Toledo Blade won’t be given the “Block Agenda”.

Cost of solar panels are affected by many factors. A number of these elements are generally fixed while some currently have great variance based upon position. In spite of ones own motives, that is still a business decision which may be somewhat pricey plus ideal business sense must be observed when selecting to obtain residential solar panels.